Prepare the journal entry to record the payment

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Question - Mining Inc. purchased an asset at a cost of $200,000 on April 1, 2020, for a project that is expected to complete in 10 years (the asset's useful life is estimated to be 10 years). The asset retirement obligation/decommissioning provision ("ARO") for this asset is estimated to be $20,000 at the end of the useful life of the project. The relevant discount rate is 6%.

PART A: Assuming Mining Inc. has a December 31 year end, prepare the journal entries for the first year of this asset's life (ie. April 1, 2020 through March 31, 2021).

PART B: On March 31, 2030, the actual asset retirement costs amount to $24,000. Prepare the journal entry to record the payment of the obligation at that time.

Reference no: EM132890641

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